Wednesday, September 23, 2015

Identity Protection Services Not Taxable

A few months ago IRS announced it had the online transcripts request system hacked into and information on more than 100,000 taxpayers may have been wrongfully obtained.  Recently IRS announced the number was actually more than 300,000.

As a result of confidential information being wrongfully obtained, either through hacking or another security breach, companies often provide credit reporting and monitoring services, identity theft insurance policies, identity restoration services, or other similar services to the customers, employees, or other individuals whose personal information may have been compromised.  These actions are intended to prevent and mitigate losses due to ID theft resulting from the data breach.

Taxable income as defined in the law includes any ascension to wealth unless specifically exempt.  Questions have arisen regarding the taxability of these ID theft services received by taxpayers.

In Announcement 2015-22 IRS has stated the value of these ID theft services are not taxable income. Therefore the value of these services are not reportable on either Forms W-2 or Forms 1099.

This announcement can be found by going to, clicking on irs-drop, and then on a-15-22.

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